Real Options: A Practitioner's Guide
This revised edition of the highly successful book, Real Options, offers corporate decision-makers the ability to assess the profitability of their ventures and decide which avenue of expansion or investment to go down and, crucially, when to take that leap. The reader goes on a journey through real options, from the basics to more advanced topics such as options and game theory. It provides expert guidance on how to implement the theory to maximize investment opportunities by utilizing uncertainty as an asset and reducing downside risk.
The Change Process
Net Present Value
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abandonment option Airbus aircraft airline American call American call options annual volatility assume assumptions binomial lattice binomial tree Black-Scholes formula calculate call option Chapter compound options confidence band correlated cost of capital decision tree deferral option discount rate dividend end-of-period equation equity estimate example exercise price expected cash flows free cash flows geometric Brownian motion hedge portfolio illustrated in Exhibit investment million Monte Carlo analysis optimal option to expand parameters payoffs payouts period phase precommit present value problem project with flexibility project without flexibility rate of return real options analysis replicating portfolio approach rf)B risk risk-adjusted risk-free rate risk-neutral probabilities shareholders shown in Exhibit solve sources of uncertainty spreadsheet standard deviation stochastic straight to market switching options technological uncertainty tion twin security underlying asset underlying risky asset valuation variable WACC weighted average cost zero